Tuesday, April 24, 2012

Stocks Rising Slightly into Final Hour on Euro Bounce, More Financial Sector Optimism, Short-Covering, Bargain-Hunting

Posted by Gary .....at 4:11 PM

Broad Market Tone:
  • Advance/Decline Line: Higher
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 18.55 -2.21%
  • ISE Sentiment Index 106.0 +29.27%
  • Total Put/Call .90 +9.76%
  • NYSE Arms .95 -52.06%
Credit Investor Angst:
  • North American Investment Grade CDS Index 99.85 -1.09%
  • European Financial Sector CDS Index 256.28 +1.84%
  • Western Europe Sovereign Debt CDS Index 280.35 -1.35%
  • Emerging Market CDS Index 265.59 -.32%
  • 2-Year Swap Spread 31.25 -.25 basis point
  • TED Spread 38.50 -1.0 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -46.0 +1.5 basis points
Economic Gauges:
  • 3-Month T-Bill Yield .08% +1 basis point
  • Yield Curve 170.0 +2 basis points
  • China Import Iron Ore Spot $146.70/Metric Tonne -.95%
  • Citi US Economic Surprise Index 4.20 -.1 point
  • 10-Year TIPS Spread 2.26 +2 basis points
Overseas Futures:
  • Nikkei Futures: Indicating a +47 open in Japan
  • DAX Futures: Indicating -21 open in Germany
Portfolio:
  • Slightly Lower: On losses in my Tech and Retail sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
  • Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite Eurozone debt angst, less tech sector optimism, high energy prices, rising global growth fears and less US economic optimism. On the positive side, Oil Tanker, Oil Service, Telecom, Homebuilding, Road & Rail, Airline and REIT shares are especially strong, rising more than +1.0%. The Transports and Financials have traded well throughout the day. Lumber is rising +1.97% and Copper is gaining +1.2%. The 10Y Yld is rising +3 bps to 1.96%. Major European indices rose around +1.75%, led by a +2.5% gain in Italy. The Bloomberg European Bank/Financial Services Index rose +2.0%. The Germany sovereign cds is down -3.0% to 87.50 bps, the France sovereign cds is down -3.5% to 198.0 bps, the Spain sovereign cds is down -3.8% to 490.66 bps and the Italy sovereign cds is down -3.0% to 454.42 bps. Moreover, the European Investment Grade CDS Index is down -2.7% to 145.31 bps. On the negative side, Software, Semi, HMO, Retail, Restaurant, Education and Internet shares are under pressure, falling more than -.75%. Tech shares have traded poorly throughout the day again. Oil is rising +.4% and the UBS-Bloomberg Ag Spot Index is rising +.4%. Major Asian indices were mixed overnight as a +.65% gain in India was offset by a -.78% decline in Japan. The Portugal sovereign cds is gaining +.4% to 1,023.19 bps. US Rail Traffic continues to soften. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak despite investor perceptions that the US economy is accelerating. Moreover, the Citi US Economic Surprise Index has fallen back to mid-Oct. levels. Lumber is -6.0% since its Dec. 29th high despite the better US economic data, improving sentiment towards homebuilders and the broad equity rally. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite expectations for a strong spring home selling season. The Baltic Dry Index has plunged around -50.0% from its Oct. 14th high and is now down around -35.0% ytd. China Iron Ore Spot has plunged -19.2% since Sept. 7th of last year. Shanghai Copper Inventories are still near their recent all-time high and have risen +668.0% ytd. China's March refined-copper imports fell -8.0% on the month. Singapore Electronics exports decelerated to a gain of +2.8% in March from a +23.3% gain in February. The recent weak/erratic technical action in shares of (AAPL), a market-leader and the largest company in the world, remains a concern. Long AAPL. Bonds still trade too well, copper continues to trade poorly and the euro currency can't sustain a bounce. Comments from German officials today lead me to conclude that a new French president would clash greatly with Merkel, which will become a major problem during the next escalation phase of the region's debt crisis. There remains a fairly high level of complacency among US investors regarding the rapidly deteriorating situation in Europe, in my opinion. I still believe more European bank/sovereign downgrades are likely on the horizon. Overall, the major averages are not responding well to a better-than-expected earnings season so far. (TXN) gappped higher after-hours yesterday on a "good report" only to fall throughout the day and finish near session lows, down -1.7%. For the recent equity advance to regain traction, I would expect to see further European credit gauge improvement, a further subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. I expect US stocks to trade mixed-to-lower into the close from current levels on Eurozone debt angst, less US economic optimism, high energy prices, rising global growth fears, weakness in some key market leaders and less tech sector optimism.
0 comments

Today's Headlines

Posted by Gary .....at 2:59 PM

Bloomberg:
  • Merkel Stands Firm on Crisis Austerity, CDU Ally Altmaier Says. German Chancellor Angela Merkel won’t budge from her insistence on budget austerity in Europe as unavoidable to resolving the debt crisis, a senior lawmaker in her party said. “The chancellor is pretty resistant to pressure,” Peter Altmaier, the chief whip of Merkel’s Christian Democratic Union, said in an interview today in Berlin. France’s presidential vote and the Dutch government’s fall don’t change the fact “there’s no money in Europe, only deficits everywhere you look.” Socialist challenger Francois Hollande, who leads President Nicolas Sarkozy in polls for France’s runoff election on May 6, said yesterday that austerity measures across Europe are leading to “desperation” and that he will refocus the euro area’s second-biggest economy on growth. Altmaier warned that Hollande risked alienating investors if he were to divert from the course of austerity. “If Mr. Hollande were to say that he wants to increase government spending and save less, he’ll lose the confidence of the financial markets,” Altmaier said. “The same financial markets that say they’re concerned about austerity will say, ‘My God, this is not serious,’ if Hollande stops austerity and does deficit spending.” Merkel will await the election outcome in France and then “try to come to an understanding with the new government, regardless of who leads it,” Altmaier said. “We will stick to our fundamental principles because there’s really no alternative.’”
  • Hollande Meets German Resistance in Anti-Austerity Push. French Socialist presidential candidate Francois Hollande’s campaign pledge to reverse Europe’s austerity drive met German resistance, pointing to tension between the region’s two biggest economies. Hollande has repeated his criticism of the German-advocated austerity and said the European Central Bank needs to do more to support Europe’s growth, comments that may put him at odds with France’s neighbor and Europe’s biggest economy. He says he’ll seek to add growth and investment measures to the fiscal treaty signed by its European partners. “We’re not saying that saving solves all problems,” German Chancellor Angela Merkel said at a conference in Berlin today. Still, “you can’t spend more than you take in. You can’t live your whole life this way. Everybody knows this.”
  • Italian Borrowing Costs Rise at Auction on Crisis Concerns. Italy was forced to pay 1 percentage point more than a month ago to sell zero-coupon bonds in the first auction since Prime Minister Mario Monti’s government moved back its balanced-budget target. The Treasury sold 2.5 billion euros ($3.3 billion) of the zero-coupon 2014 debt to yield 3.355 percent, up from 2.352 percent at the previous auction on March 27. Investors bid for 1.80 times the amount offered, down from 1.86 times last month. The Rome-based Treasury also sold 943 million euros of inflation-linked bonds due in 2017 and 2019 to yield 3.88 percent and 4.32 percent, respectively. The auction’s maximum target was 3.5 billion euros. Italy’s 10-year bond, which initially rose after the auction, pared the gains to yield 5.74 percent at 12:09 p.m. Rome time, pushing the difference or spread with similar- maturing German debt to 407 basis points. That compares with 372 basis points the day before Monti announced new budget forecasts on April 18.
  • Greek Economy May Contract Near 5% of GDP in 2012, Ta Nea Says. Greece’s central bank forecasts the country’s economy will contract by almost 5 percent of gross domestic product this year, which is higher than a 4.5 percent estimate made last month, Ta Nea reported, without saying where it got the information. Unemployment in 2012 is expected at 19 percent, Ta Nea reported.
  • Sovereign, Corporate Bond Risk Falls, Credit-Default Swaps Show. The cost of insuring against default on European sovereign and corporate debt fell, according to data compiled by Bloomberg. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments dropped 3.5 basis points to 281 at 9:40 a.m. in London. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings declined 13 basis points to 678. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings dropped 3.5 to 146 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers declined six basis points to 257 and the subordinated index dropped 7.5 to 414.5.
  • German Windmill Makers Suffering Similar Fate to Solar, FTD Says. German windmill makers such as Nordex SE are suffering a similar fate to solar companies as Chinese firms push into the market, Financial Times Deutschland said, citing Manfred Bayerlein, chief executive officer of wind power certification company TUEV Rheinland. While China’s technology is a few years behind, their products are already economical, Bayerlein said, according to the German newspaper. Chinese companies entering the market has contributed to a 25 percent drop in prices since 2008, FTD said. German solar companies such as Solon SE (SOO1), Solar Millennium AG (S2M) and Q-Cells SE (QCE) have filed for insolvency, while China has built up an industry with more than 400 companies, some of which are market leaders, FTD said.
  • U.S. Lost AAA Rating on Danger of Liquidity Crisis, S&P's Kraemer Says. The U.S. lost its top credit grade in August because of the imminent danger of a “real liquidity crisis,” and Standard & Poor’s made no errors in its analysis, said Moritz Kraemer, managing director of sovereign ratings. “Last summer, the U.S. government got extremely close to a real liquidity crisis because the Washington establishment could not agree on the way forward that would have been required to raise the debt ceiling,” Kraemer told lawmakers on the U.K. Parliament’s Treasury Committee today in London.
  • Consumer Confidence in U.S. Little Changed as Outlook Cools. Confidence among U.S. consumers was little changed in April as expectations over the outlook tempered increased optimism about the present. The Conference Board’s confidence index was at 69.2 com- pared to a revised 69.5 in the prior month, figures from the New York-based private research group showed today. The median forecast of economists surveyed by Bloomberg News called for a reading of 69.6. The gauge of expectations for the next six months declined to 81.1 from 82.5. The share of consumers who said jobs are currently plentiful decreased to 8.4 percent from 9 percent. The percent of respondents expecting more jobs to become available in the next six months decreased to 16.9 from 17.4 the previous month. The proportion who expect their incomes to rise over the next six months declined to 14 percent from 15.5 percent. The share of households planning to buy a car dropped to the lowest level since comparable records began in November 2010. Consumers also cut back on plans to buy houses and take vacations.
  • El Nino May Cool Summer, Cutting US Electric Need. The possibility of an El Nino, a warming of the mid-Pacific Ocean, has forecasters predicting lower temperatures across the U.S. this summer, which may mean less electricity will be needed to run air conditioners.
  • China Tire Demand Slows as Economy Decelerates, Bridgestone Says. Tire demand in China, the largest rubber consumer, is growing at a slower pace than last year as the nation’s economic expansion is decelerating, said an executive at Bridgestone Corp. (5108), the biggest tiremaker.
Wall Street Journal:
  • Greece Risks Euro Exit if Reforms Stall. Greece's central bank governor Tuesday warned the country's politicians that any deviation from strict austerity targets after May 6 general elections would risk forcing the country out of the 17-member euro currency bloc, even as the central bank signaled that the economy would contract by a worse-than-expected 5% this year. In an unusually blunt warning that cut through much of the lofty rhetoric coming from candidates, George Provopoulos said Greece faced a stark and historic choice between overhauling its economy as a member of the currency bloc, or turning back the clock on decades of economic progress and eventual exit from the euro. "There is no easy way out of the crisis. The adjustment must be pursued with determination," Mr. Provopoulos said in a speech. "If, after the elections, there is any question about the will of the new government and society to implement the program..the country will then be at risk of finding itself very quickly in a particularly adverse situation." "What is at stake is the choice between an orderly, albeit painstaking, effort to reconstruct the economy within the euro area, with the support of our partners; or a disorderly economic and social regression, taking the country several decades back, and eventually driving it out of the euro area and the European Union," he said.
  • IBM(IBM) Boosts Dividend 13%; Adds $7 Billion to Buyback Program. International Business Machines Corp.'s (IBM) board approved a 13% increase in the technology heavyweight's quarterly dividend and authorized an additional $7 billion to buy back shares as the company looks to return more of its rising cash levels to shareholders.
  • Wall Street Promotes Junk Bonds as Europe Erupts. Morgan Stanley (MS), JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) are recommending junk bonds as Europe’s sovereign-debt crisis flares and concern mounts over the strength of the U.S. recovery. Morgan Stanley said last week that U.S. high-yield obligations were in a “sweet spot” as borrowers cut their debt loads. JPMorgan said junk yields will fall more than half a percentage point by year-end. Bank of America favors debentures rated in the middle tier of speculative grade.
  • A Need to Know Basis: Apple(AAPL) Earnings Preview.
MarketWatch:
  • Oil Futures Gain as Euro-Zone Worries Recede. Crude-oil prices advanced Tuesday, buoyed by better market sentiment regarding Europe and also garnering some support from a weaker dollar. Concerns about excess supply ahead of U.S. inventory data weighed negatively, however, as did mixed housing data. Crude oil for June delivery CLM2 +0.44% added 63 cents, or 0.6%, to $103.73 a barrel on the New York Mercantile Exchange.
Business Insider:
Zero Hedge:
 New York Times:
  • Cost of Spain's Housing Bust Could Force a Bailout. Since the frenzy drove Spanish home prices to a peak in 2007, they have fallen by at least one-fourth, and the bottom seems nowhere in sight. As Spain endures its second recession in three years and unemployment nears 25 percent, an increasing number of debt-heavy Spaniards can no longer meet monthly payments on the mortgages that their banks were all too eager to give. With a rising portion of Spain’s 663 billion euros, or $876 billion, in home mortgages at risk of default, many economists say it is only a matter of time before some of Spain’s biggest banks will need a bailout. And the Spanish government, staggering under its own debt and budget deficit burdens, may not have the money to come to the rescue. The implications of all this for the rest of Europe were a prime topic at last weekend’s meetings of the International Monetary Fund and the World Bank in Washington. The big fear is that the European Union will need to step in with a Spanish bailout — one much bigger than any of those already extended to Ireland, Greece and Portugal.
Washington Post:
  • Home Prices Remain Near Post-Crisis Low; New-Home Sales Fall 7%. The latest survey from S&P/Case-Shiller noted basically stagnant prices from January to February. Adjusted for seasonal variations in sales, prices rose slightly in February after several months of decline. Without adjusting for seasonal differences, the survey of prices in 20 metropolitan areas fell to its lowest level since the housing market downturn began.

The Detroit News:

CNN:

Reuters:

  • Exclusive: North Korea's Nuclear Test Ready "Soon". North Korea has almost completed preparations for a third nuclear test, a senior source with close ties to Pyongyang and Beijing told Reuters, which will draw further international condemnation following a failed rocket launch if it goes ahead.
  • Maybe No Housing Rebound for a Generation: Shiller. The Housing market is likely to remain weak and may take a generation or more to rebound, Yale economics professor Robert Shiller told Reuters Insider on Tuesday. Shiller, the co-creator of the Standard & Poor's/Case-Shiller home price index, said a weak labor market, high gas prices and a general sense of unease among consumers was outweighing low mortgage rates and would likely keep a lid on prices for the foreseeable future."I worry that we might not see a really major turnaround in our lifetimes," Shiller said. The S&P/Case-Shiller composite index of 20 metropolitan areas gained 0.2 percent in February on a seasonally adjusted basis, the first uptick in prices in 10 months. But Shiller called it "a very mixed bag." Nine of the 20 cities recorded falling or flat prices on the month.He said suburban areas in particular might endure further price declines as high gas prices increase demand for "walkable cities."
  • High Gas Prices Dampen US Gasoline Demand. U.S. gasoline demand fell last week as prices held higher than levels seen a year ago, MasterCard said in its weekly Spending Pulse report on Tuesday. Gasoline demand fell 6.1 percent from a year earlier as a gallon of the fuel at the pump cost 1.3 percent more than it did last year, MasterCard data showed.
  • US 'Fiscal Cliff' Makes US Fed Queasy. Federal Reserve policymakers are sounding the alarm over a "fiscal cliff" at the end of this year, when scheduled U.S. tax hikes and spending cuts could pose a big threat to the fragile economic recovery. Along with its official mandate of watching unemployment and inflation, the U.S. central bank is keeping a close eye on a potentially debilitating political fight over how to fix the budget deficit.
  • US Senate Democrats Close Ranks to Fight Keystone Oil Pipeline. U.S. Senate Democrats closed ranks on Tuesday to block quick approval of the Keystone XL oil pipeline as they begin negotiations with House of Representatives Republicans on a compromise job-creating transportation construction bill.

Telegraph:

  • Debt Crisis: Live. Far-right leader Geert Wilders says Dutch budget decisions are a choice between ordinary citizens or unelected bureaucrats, as MPs reject strict budget rules enshrined in a new European fiscal pact.
  • Britain's National Debt Rises Above £1 Trillion. (graph) The Government met its full-year target of £126bn because of downward revisions to previous months, but the national debt rose above £1 trillion - it is now 66pc of GDP and the highest since records began in 1993.
  • ARM(ARMH) Shares Drop 6% on Electronic Sales Slowdown. Shares in ARM Holdings have tumbled more than 6pc despite a sharp hike in profits, as the Cambridge-based chip designer admitted that flooding in Thailand and a slowdown in sales of consumer electronics had put the breaks on its royalty income.
0 comments

Bear Radar

Posted by Gary .....at 1:33 PM

Style Underperformer:
  • Mid-Cap Growth -.56%
Sector Underperformers:
  • 1) HMOs -1.51% 2) Retail -1.01% 3) Semis -.73%
Stocks Falling on Unusual Volume:
  • BIG, SYMC, BKS, JIVE, RAI, AAPL, PSMT, LO, CRDN, HSTM, VLTR, TWIN, NFLX, ULTA, RCII, ARMH, CPLA, BRKR, CHKP, TXN, ZION, FTNT, SCSS, ANGI, INFA, CHSI, ACTG, HIT, WAT, CR, APD, LXK, CXW, COH, GWW, MTR, MSM, CIT, TPX and CNC
Stocks With Unusual Put Option Activity:
  • 1) COP 2) SYMC 3) WMT 4) MMI 5) GR
Stocks With Most Negative News Mentions:
  • 1) BIG 2) NFLX 3) SANM 4) JEF 5) CMG
Charts:
0 comments

Bull Radar

Posted by Gary .....at 11:20 AM

Style Outperformer:
  • Small-Cap Value +.93%
Sector Outperformers:
  • 1) Homebuilders +2.45% 2) Oil Service +1.72% 3) Oil Tankers +1.27%
Stocks Rising on Unusual Volume:
  • TI, T, FIO, ALGN, IDCC, PVTB, FMER, CSL, PH, GNI, HSY, BHI, LII, HXL and KSU
Stocks With Unusual Call Option Activity:
  • 1) CXW 2) IDCC 3) RSH 4) CE 5) KMB
Stocks With Most Positive News Mentions:
  • 1) IBM 2) NFLX 3) EAT 4) T 5) ALGN
Charts:
0 comments

Tuesday Watch

Posted by Gary .....at 12:17 AM

Evening Headlines
Bloomberg:
  • Weidmann Says Bundesbank Is Preserving Euro Stability. Bundesbank President Jens Weidmann said the German central bank’s actions are aimed at maintaining the stable foundation of the euro and preventing an erosion of the single currency’s acceptance. “What we are doing is preserving the stability foundation of the single currency,” Weidmann said today in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “If the stability foundation of the euro is eroded, then we will also see the acceptance of the single currency eroded.” The Bundesbank has faced criticism, including from billionaire George Soros, for speaking out against some European Central Bank crisis-fighting measures such as government bond purchases. Weidmann said Soros’s charge that the Bundesbank is preparing for the end of the euro is “ridiculous.” “We shouldn’t get so excited about bond yields rising for a limited period of time,” Weidmann said. “They also constitute an incentive to reform, to embark on consolidation.” The ECB, which has pumped more than 1 trillion euros ($1.3 trillion) into the banking sector since December in a bid to avert a credit crunch, has “done its job,” Weidmann said. Weidmann added that governments must now press on with budget cuts and structural reforms to encourage economic growth. “It’s important to get the message to governments, ‘this is your job now,’” Weidmann said.
  • Dutch Cabinet Collapse Shows Folly of Merkel Fiscal Pact. Alarm over Europe’s financial predicament is surging again. The immediate cause is the European Union’s fiscal pact. Germany insisted on this plan to cut public borrowing sharply and immediately, and euro-area governments hoped it would restore stability. It’s doing the opposite. The pact is proving so unpopular that it’s undermining governments, and not just in the peripheral countries most obviously at risk. The stresses caused by the EU’s strategy influenced presidential elections on Sunday in France and forced a crucial partner in German Chancellor Angela Merkel’s austerity drive, Dutch Prime Minister Mark Rutte, to offer his cabinet’s resignation on Monday. While socialist Francois Hollande’s campaign against French President Nicolas Sarkozy’s “excessive austerity” has received considerable attention, Europe’s big surprise came when the Dutch coalition government resigned, days after the far-right anti-EU Freedom Party refused to go along with the center-right Liberals’ plans for budget cuts to comply with the new fiscal pact. Voters in the Netherlands don’t appear to be deserting the Liberals, but the collapse of the coalition and the need for new elections complicates parliamentary ratification of the budget deal, due by the end of the year.
  • Hollande Blames Europe’s Austerity Plan for Le Pen’s Rise. Francois Hollande, the winner of the first round of France’s elections, said Europe’s austerity drive fueled despair and created conditions for the record-high score for anti-euro National Front leader Marine Le Pen. Le Pen, the leader of the nationalist, anti-immigrant party, won 17.9 percent, or 6.4 million votes, surpassing poll estimates with the highest tally for the National Front created by her father Jean-Marie Le Pen in 1972. Hollande, the Socialist candidate, got 28.6 percent in the April 22 ballot, leaving him to face President Nicolas Sarkozy in next month’s runoff. Sarkozy won 27.2 percent.
  • China's Stocks Drop on Economic Slowdown, European Debt Concerns. China’s stocks fell for a second day after a leading index for the nation rose at a slower pace in March and political uncertainty in Europe hurt the outlook for Chinese exports to its biggest trading partner. Yanzhou Coal Mining Co. (600188), China’s fourth-biggest coal miner, slid 3.4 percent after net income slumped in the first three months of the year. Jiangxi Copper Co. led a decline for commodity producers on concern Europe will struggle to contain its debt crisis as a political backlash against budget cuts gained momentum. Risen Energy Co. plunged more than 8 percent for a second day after officials tightened standards for small companies listed on the ChiNext Board. “Europe’s political uncertainty adds to the risk from the debt crisis,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “The environment isn’t favorable for risk assets like equities.” The Shanghai Composite Index fell 19.8 points, or 0.8 percent, to 2,368.75 at 11:14 a.m. local time, after gaining as much as 1.1 percent.
  • SEC Claims Ex-Calpers CEO Steered $20 Million to Friend. A former chief executive of the California Public Employees’ Retirement System was sued by U.S. regulators over claims he defrauded an investment firm into paying $20 million in fees to a friend’s placement agencies. Federico Buenrostro, who was Calpers CEO from 2002 to 2008, and Alfred Villalobos, the former deputy mayor of Los Angeles, fabricated documents given to New York private-equity firm Apollo Global Management (APO) to present the false impression that the pension fund had reviewed and signed placement-agent fee- disclosure letters, the Securities and Exchange Commission said today in a lawsuit filed in U.S. District Court in Nevada.
  • Wal-Mart(WMT) Said to Be Subject of U.S. Criminal Probe. Wal-Mart Stores Inc. is the subject of a U.S. Justice Department criminal investigation into allegations of bribery in its Mexican subsidiary, according to a person familiar with the probe. Allegations that representatives of the Bentonville, Arkansas-based retailer bribed local officials in Mexico to get stores opened faster in the early 2000s were described in an April 21 New York Times story.
  • Afghan Stability Undermined by Pakistan, General Says. Hard-won stability in Afghanistan’s Helmand Province is undermined by the Pakistan Army’s failure to help stem the flow of arms coming into the area and drugs going out, a U.S. general said. “Everything is good, but it’s not irreversible,” Marine Corps Major General John Toolan said in an interview in Washington yesterday after appearing before the Atlantic Council, a policy research group. He ended a one-year tour last month as the commander in charge of the NATO coalition’s southwestern regional command responsible for Helmand.
Wall Street Journal:
  • Economic Gloom Deepens Europe's Political Crisis. The Dutch government fell amid a dispute over budget cuts, underscoring the growing difficulty Europe's leaders face against a darkening economic picture, massive debts, angry voters and volatile financial markets. On Monday, Dutch Prime Minister Mark Rutte became the latest euro-zone leader to fall victim to the region's economic funk, tendering his resignation after failing to win enough backing in parliament for measures to cut the country's budget deficit. The leaders of Greece, Portugal, Ireland, Spain and Italy also have been forced out recently as the region's economy worsens.
  • Stress Rises on Social Security. Social Security, which pays retirement and disability benefits to 56 million Americans, will exhaust its reserves by 2033, three years sooner than previously estimated, a new government report said Monday. The forecast raises pressure on the White House and Congress to tackle the entitlement program, which many politicians fear changing because of potential voter backlash.
  • Facebook's(FB) Growth Slows as IPO Nears. As Facebook Inc. enters the final weeks before its landmark initial public offering, not all of the arrows are pointing up. In what is likely to be the last snapshot of its financial condition before the expected May IPO, Facebook disclosed Monday that its first-quarter profit and revenue declined from the final quarter of 2011.
  • Judge: DA Can Subpoena NY Occupy Protester Tweets. A judge says an Occupy Wall Street protester can't stop prosecutors from getting his tweets as part of a case surrounding his arrest at a demonstration. A Manhattan criminal court judge ruled Friday there are reasonable grounds to believe the information is relevant. The judge also says Malcolm Harris can't legally challenge the subpoena sent to Twitter Inc., not him.
  • Running Mate Dance Begins. Mitt Romney worked to lock up the Republican presidential nomination in a Pennsylvania campaign swing Monday that also served a general-election purpose: debuting a potential running mate. The likely GOP nominee shared the stage in this Philadelphia suburb with Florida Sen. Marco Rubio, a 40-year-old Cuban-American conservative, as he focused his attention on the November matchup with President Barack Obama.
Barron's:
  • Big Lots(BIG) Plunges as Electronics Sales Drop. Big Lots (BIG) fell 15% after the retailer said it now expects to post negative comparable store sales in the first quarter after previously issuing guidance for 2% to 4% growth. The company said its electronics sales in particular have performed worse than expected.
MarketWatch:
  • China Tops World in Shopping Mall Construction. China dominates the world in terms of shopping-mall construction, with some cities little-known in the West throwing up retail centers on a scope unmatched anywhere else in the world, as developers place high expectations on the spending power of the Chinese consumer. In terms of shopping-center space under construction, China holds the top three spots worldwide, and accounts for 8 of the cities that make up the top 10, according to CBRE, which released the data as part of its global retail survey earlier last week. The world’s busiest mall-construction hub, Tianjin, a major northeastern Chinese port city near the capital Beijing, has more shopping-center space under construction than the entire existing mall-space inventory of any single European city, apart from Paris and Moscow, according to CBRE. About 16 projects are in various stages of completion, entailing 2.45 million square meters (26.4 million square feet), according to the CBRE data.
Business Insider:
 Zero Hedge:
 CNBC:

NY Times:

CNN:
  • Medicare Funding Runs Short by 2024, Trustees Say. Highlighting the fiscal problems posed by growing health costs and an aging population, the trustees of the nation's main entitlement programs estimated Monday that Medicare will only be able to pay a portion of its expected costs starting in 2024.
Rasmussen Reports:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-three percent (43%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -19 (see trends).
Reuters:
  • Philadelphia Refinery Would Run Bakken, Syncrude - Source. Refiner Sunoco Inc and private equity firm Carlyle Group are planning to revive the fortunes of the 335,000 barrel per day refinery in Philadelphia by running about half of it on crude from North Dakota and Canada, a source familiar with the plan said on Monday.
  • Google(GOOG) to Launch Online Storage Service for Consumers - Source. Google Inc is preparing to roll out a service to let consumers store photos and other content online, a source familiar with the matter said, pushing into a market now dominated by the likes of Dropbox and Box.
  • ECB to Take All Necessary Measures for Prices - Noyer. Europe's central bank will take "all necessary measures" to stabilize prices, and banks and governments should see its recent exceptional measures as a "window of opportunity" to make improvements, ECB governing council member Christian Noyer said on Monday. Noyer was one of two ECB policymakers to speak about the importance of remaining focused on the central bank's mission of keeping prices in check. Recent funding operations to help stave off a liquidity crunch have raised worries about inflation among hard-liners. "First and foremost, we are providing price stability and will continue to take all necessary measures to fulfill this mandate," Noyer, who is also governor of the Bank of France, said at a conference at the New York Stock Exchange. "Moreover, our recent exceptional and temporary measures should be seen as a window of opportunity for banks to strengthen their balance sheets and for governments to step up their efforts in a less troubled financial environment."
  • US SEC Charges SinoTech, Execs With Lying to Investors. U.S. securities regulators charged China-based SinoTech Energy Ltd and its senior executives with misleading investors on Monday, part of an effort to crack down on accounting problems at Chinese companies listed in the United States.
  • Spanish Banks Need Urgent Halt to Avert Crisis - Sweden's Borg. Europe must deal urgently with Spain's banking problems, which hang like a dark cloud threatening global economic recovery, Sweden's Finance Minister Anders Borg said on Monday. Failure to recapitalize Spanish banks quickly could throw Madrid into a bailout program, even though its current fiscal situation is manageable, Borg told the Peterson Institute for International Economics.
Financial Times:

Evening Recommendations
Piper Jaffray:
  • Rated (LNKD) Overweight, target $130.
Night Trading
  • Asian equity indices are -1.25% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 169.0 +1.5 basis points.
  • Asia Pacific Sovereign CDS Index 135.50 +.75 basis point.
  • FTSE-100 futures +.18%.
  • S&P 500 futures +.11%.
  • NASDAQ 100 futures +.11%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (UTX)/1.19
  • (TROW)/.77
  • (R)/.58
  • (HSY)/.81
  • (BHI)/.80
  • (APD)/1.33
  • (AKS)/-.12
  • (X)/.49
  • (ALXN)/.39
  • (WAT)/.04
  • (LXK)/1.04
  • (RF)/.08
  • (COH)/.75
  • (MHP)/.48
  • (MMM)/1.49
  • (ITW)/.95
  • (T)/.57
  • (PCAR)/.79
  • (RHI)/.28
  • (CHRW)/.65
  • (AFL)/1.65
  • (BCR)/1.57
  • (PNRA)/1.34
  • (IGT)/.25
  • (AAPL)/9.96
  • (AMGN)/1.46
  • (JNPR)/.13
  • (CBG)/.13
  • (NSC)/1.12
  • (BWLD)/.96
  • (DV)/.99
Economic Releases
9:00 am EST
  • The S&P/CS 20 City Home Price Index MoM% SA for February is estimated to rise +.2% versus a -.04% decline in January.

10:00 am EST

  • Consumer Confidence for April is estimated to fall to 69.7 versus 70.2 in March.
  • New Home Sales for March are estimated to rise to 318K versus 313K in February.
  • Richmond Fed Manufacturing for April is estimated to fall to 6.0 versus 7.0 in March.
  • The House Prices Index for February is estimated to rise +.1% versus unch. in January.

Upcoming Splits

  • (HEI) 5-for-4

Other Potential Market Movers

  • The Italian Note/Bond Auctions, Spanish 3-6 Month Bill Auction, 2-Year T-Note Auction, weekly retail sales reports and the Barclays Capital Retail/Restaurants Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
0 comments

Monday, April 23, 2012

Stocks Lower into Final Hour on Rising Eurozone Debt Angst, Less US Economic Optimism, Rising Global Growth Fears, Less Tech Sector Optimism

Posted by Gary .....at 4:11 PM

Broad Market Tone:
  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 19.06 +9.29%
  • ISE Sentiment Index 73.0 -35.40%
  • Total Put/Call .84 -3.45%
  • NYSE Arms 1.81 +35.72%
Credit Investor Angst:
  • North American Investment Grade CDS Index 101.31 +1.57%
  • European Financial Sector CDS Index 254.92 +3.07%
  • Western Europe Sovereign Debt CDS Index 285.87 +1.18%
  • Emerging Market CDS Index 267.17 +.71%
  • 2-Year Swap Spread 31.50 +1.25 basis points
  • TED Spread 39.50 -.5 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -47.50 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .07% unch.
  • Yield Curve 168.0 -1 basis point
  • China Import Iron Ore Spot $148.10/Metric Tonne -.20%
  • Citi US Economic Surprise Index 4.30 -.7 point
  • 10-Year TIPS Spread 2.24 -1 basis point
Overseas Futures:
  • Nikkei Futures: Indicating a -100 open in Japan
  • DAX Futures: Indicating +21 open in Germany
Portfolio:
  • Slightly Lower: On losses in my Medical, Tech and Retail sector longs
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added them back
  • Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 breaks convincingly below its 50-day moving-average on rising Eurozone debt angst, less tech sector optimism, high energy prices, rising global growth fears and less US economic optimism. On the positive side, Road & Rail shares are slightly higher on the day. Oil is falling -.99% and Gold is down -.33%. The Portugal sovereign cds is down -4.4% to 1,019.10 bps. On the negative side, Alt Energy, Steel, Paper, Networking, Construction, Homebuilding, Airline, Ag, I-Banking, Hospital and Food shares are under meaningful pressure, falling more than -1.75%. Small-caps are underperforming. Tech shares have traded poorly throughout the day. Copper is falling -1.7%, Lumber is down -.62% and the UBS-Bloomberg Ag Spot Index is rising +.2%. The 10-year yield is falling another -3 bps to 1.93%. Major Asian indices fell around -.75% overnight, led lower by a -1.84% decline in Hong Kong. Asian losses accelerated in the final hour of trading. Major European indices are falling around -3.0% today, led lower by a -3.8% decline in Italy(-8.2% ytd). Spanish shares are falling another -2.8% and are now down -20.1% ytd(very close to its March 2009 low). The Bloomberg European Bank/Financial Services Index is falling another -3.3% and is down -17.8% in a little over one month. The Germany sovereign cds is gaining +4.4% to 90.28 bps(up over +30.0% in 7 days), the Spain sovereign cds is gaining +1.5% to 509.70 bps, the France sovereign cds is gaining +2.7% to 205.08 bps, the Japan sovereign cds is gaining +2.2% to 97.12 bps, the Russia sovereign cds is gaining +2.8% to 206.17 bps, the UK sovereign cds is up +2.8% to 64.74 bps, the Israel sovereign cds is up +2.9% to 197.13 bps and the US sovereign cds is soaring +19.8% to 36.55 bps. Moreover, the European Investment Grade CDS Index is gaining +4.0% to 149.34 bps and the Italian/German 10Y Yld Spread is rising +3.3% to 408.62 bps. The big rise in the US sovereign cds today may indicate a significant change with respect to inventor perceptions regarding the health of the US economy. US Rail Traffic continues to soften. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak despite investor perceptions that the US economy is accelerating. Moreover, the Citi US Economic Surprise Index has fallen back to mid-Oct. levels. Lumber is -8.0% since its Dec. 29th high despite the better US economic data, improving sentiment towards homebuilders and the broad equity rally. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite expectations for a strong spring home selling season. The Baltic Dry Index has plunged around -50.0% from its Oct. 14th high and is now down around -35.0% ytd. China Iron Ore Spot has plunged -18.2% since Sept. 7th of last year. Shanghai Copper Inventories are still near their recent all-time high and have risen +692.0% ytd. China's March refined-copper imports fell -8.0% on the month. Singapore Electronics exports decelerated to a gain of +2.8% in March from a +23.3% gain in February. The recent weak/erratic technical action in shares of (AAPL), a market-leader and the largest company in the world, remains a concern. Long AAPL. Bonds still trade too well, copper continues to trade poorly and the euro currency can't sustain a bounce. News from Europe over the weekend was even worse than the market had priced in. Recent developments in France are hugely negative for the long-term economic health of the region, in my opinion. The usual morning dip buyers made a stand in the financials(XLF). There remains a fairly high level of complacency regarding the rapidly deteriorating situation in Europe, in my opinion. The ongoing significant rise in German cds remains a red flag. More bank/sovereign downgrades are likely in the region over the coming weeks. For the recent equity advance to regain traction, I would expect to see further European credit gauge improvement, a further subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. I expect US stocks to trade mixed-to-lower into the close from current levels on rising Eurozone debt angst, less US economic optimism, high energy prices, rising global growth fears and less tech sector optimism.
0 comments
Subscribe to: Posts (Atom)